2018 (9) TMI 661 - AT - Service Tax

Construction services - construction of commercial or industrial building and civil structures - Department alleged that the appellant had received 2, 40, 77, 168/- against exempted services and 7, 48, 08, 499/- against above said taxable services during the period 2006-07 to 2010-11. The appellant neither obtained the registration for being service provider nor had filed ST-3 Returns during the period April 2006 to September 2007. - composition scheme - benefit of abatement. Held that - The demand confirmed qua the work orders in respect of construction as well as the maintenance of the road including the Hanumangarh Sangria Road Project is liable to be set aside - Appellant is held entitled for the benefit of the composition scheme. Appeal allowed in part.

Issues Involved:
1. Taxability of construction and maintenance of roads
2. Taxability of construction of staff quarters for Railways
3. Taxability of maintenance or repair of Industrial Training Institute Building
4. Taxability of construction of Godowns and Common Auction Platforms for Rajasthan State Agricultural Marketing Board
5. Taxability of construction for Ganga Nagar Sahakari Upbhokta Wholesale Bhandar
6. Classification of services under manpower recruitment and supply agency service
7. Denial of the benefit of the Composition Scheme under Works Contracts (Composition Scheme) for Payment of Service Tax Rules, 2007

Detailed Analysis:

1. Construction and Maintenance of Roads:
The appellant argued that construction and maintenance of roads should be excluded from taxable services under the definitions of 'Maintenance, Management Repair Service' (MMRS) and 'Work Contract Service' (WCS) as per Section 65 (64) and Section 65(105)(zzzza) of the Finance Act. The adjudicating authority initially dropped the demand for construction and repair of roads but upheld the demand for maintenance of private roads. The tribunal concluded that the exclusion clause of Section 65 (105) (zzzza) does not distinguish between public and private roads, and thus, maintenance of roads should not be taxable. The demand for the work order dated 10th December 2010 was upheld as it was beyond the period covered by the exemption notification.

2. Construction of Staff Quarters for Railways:
The adjudicating authority excluded the construction of staff quarters for Railways from tax liability, considering it a residential complex intended for personal use by Railway staff. The tribunal upheld this decision, noting that such constructions fall under the exclusion clause of Residential Complex Services as per Section 65 (91a) of the Finance Act.

3. Maintenance or Repair of Industrial Training Institute Building:
The tribunal observed that Section 98 of the Finance Act, incorporated retrospectively, exempts management, maintenance, or repair of non-commercial government buildings from service tax for the period from 16th June 2005 to 2012. The tribunal upheld the adjudicating authority's decision to drop the demand, as there was no evidence that the ITI building was used for commercial purposes.

4. Construction of Godowns and Common Auction Platforms:
The appellant contended that construction for the Rajasthan State Agricultural Marketing Board should not be considered commercial. However, the tribunal agreed with the adjudicating authority that common auction platforms are used for commercial activities by private entities, thus falling under commercial and industrial construction services. The demand for construction of godowns for State Farms Corporation of India was also upheld, as the activities were commercial in nature.

5. Construction for Ganga Nagar Sahakari Upbhokta Wholesale Bhandar:
The tribunal upheld the adjudicating authority's decision that the construction for Ganga Nagar Sahakari Upbhokta Wholesale Bhandar, which involved commercial activities like distribution of gas cylinders, falls under commercial and industrial construction services and is liable to tax.

6. Classification of Services under Manpower Recruitment and Supply Agency Service:
The adjudicating authority dropped the demand classified under manpower recruitment and supply agency service, except for the Hanumangarh Sangria Road Project, which was reclassified under commercial and industrial construction service. The tribunal modified the findings, stating that the project falls under the exclusion clause of Commercial & Industrial Construction Service as it involves road construction.

7. Denial of the Benefit of the Composition Scheme:
The tribunal found that the adjudicating authority erred in denying the benefit of the Composition Scheme to the appellant. The appellant was entitled to opt for the Composition Scheme under Rule 3(1) of the Works Contracts (Composition Scheme) for Payment of Service Tax Rules, 2007. The tribunal allowed the appellant the benefit of the Composition Scheme and set aside the order to that extent. The tribunal upheld the adjudicating authority's decision to allow cum-tax benefit and the benefit under Notification No.1/2006-ST dated 1st March 2006.

Conclusion:
The tribunal concluded that the demand for construction and maintenance of roads should be set aside, and the appellant is entitled to the benefit of the Composition Scheme. Other findings of the adjudicating authority, including the imposition of penalties, were upheld. The appeal was partly allowed with consequential benefits to follow.

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